A common question Shy Entrepreneurs ask is “What are the best small businesses to start?” While I could take the route others have and list the top 10 small businesses of 2014 I would rather go into the fundamental principles you should look out for in each options you read about. Here is a quick list of business types you are bound to see;
- Athletic Trainer
- Computer repair
- Graphic design
- Elderly Health Care
The list could go on but rather than throwing you fish why don’t I teach you to fish? There are commonalities that these and other business options share that make them good candidates. That said the best option for you will not be the best option for someone else. Lets take a look at the criteria that make for good options.
Small businesses by nature are often service based. There are many reasons for this but the biggest reason is providing a service can’t be boxed up and sold at major retailers. People have needs and a serviced based company that can meet those needs can have a good shot at success. This means there will also be a high degree of labor required for the business to operate. If you are the one providing the labor keep this in mind as you begin to scale up. All business is very much relational and serving is a great way to build relationships.
Services also don’t require much of an overhead. Take Janitorial services for example, after purchasing your cleaning equipment (much of which you probably already have) there are few other reoccurring costs. There will be expenses but it’s not like you are leasing a piece of machinery or office space while business is slow.
Low Sunk Cost
Starting a service based organization usually means you will have a lower financial barrier of entry. Sunk costs are the un-recoupable costs associated with your launch. A small business by definition does not have much money behind it so keeping the sunk costs low is vital. While not always the case a high financial barrier of entry could also imply high costs to continue on.
Conducting business will require some level of financial planning so you won’t be able to spend your complete budget right out of the gate. Only a portion of your startup capital can be used as you launch. As a side note be warned that a lower financial barrier of entry also means you will have a lot of turnover competition. Competitors will come and go as they try their hand in your niche. This competition will be people that want to get started but don’t know what they are doing. They will pull jobs out from under you by low balling the price but this practice will put them out of business as fast as they started up. What does this mean for you? It means you will have to deal with constraint haggling about lowering your price. Don’t worry its how business works but as long as you have a strong competitive advantage you will be fine.
High Degree of Customization
As a service based business there will also be a high degree of customization. This means no two jobs are going to be the same. A janitor for example may always be cleaning but what they clean will be different from client to client. A handyman for example may build a deck one day and fix a sink the next. This “customization” is what allows the market to exist. If the problems were always the same a single solution could be put together, boxed up, and sold through larger businesses.
You will be in the business of solving other people’s problems which means the specifics of your service will be in constant flux. That said it will also be assumed that you will provide your solution/service in a short amount of time. Larger organizations can offer custom solutions but they won’t be able to offer the solution as quickly as you can.
If it’s possible you will want to start a non-seasonal business. Having a non-seasonal business means your cash flow will be more consistent on an annual basis. As stated earlier small businesses fundamentally don’t have much money behind them so dealing with seasonal trends could be a tough reality to handle. A caveat to this could be offering different services in your off season. My brother in law runs a landscaping business and they keep moving through the winder by offering snow removal services.
Even non-seasonal niches will see a rise and fall in demand so be prepared to weather some downturns. Inconsistent need is often consistent with small business so adding seasonality on top of it can be a headache. If you like change a seasonal business may be perfect for you but from a business stand point additional flocculation is generally frowned upon.
Organic Growth Scalability
When you start your business you will probably be the entirety of your organization which means you are your fist business. This is important to realize as you grow. I very much believe an organic growth strategy is required if you are to build your business into a long lasting company. If you are handed a business or see too much growth too quickly your likelihood of failure begins to rise. This is because variability is introduced with a steep growth curve. If on the other hand you take it one step at a time and learn all there is to learn you will build a foundation that will not easily be shaken.
Lastly don’t get caught up in fast money. You will need to be willing to put in the time and effort no matter what avenue you decide to take. Chasing the “easy money” businesses will only serve to keep you in the rat race. Understand that success will come with time. As long as you continue to pursue excellence you will no doubt find yourself running one of the best small businesses to run regardless of industry or niche.